Delta, pension agency reach accord
ATLANTA -- Delta Air Lines Inc. and the Pension Benefit Guaranty Corp. have reached a settlement over key issues related to the carrier's request to terminate its pilots' pension plan.
Under the pact, the government's pension insurer would get an unsecured claim of $2.2 billion against the nation's third-biggest carrier. That would put it in line with other unsecured creditors for compensation after Delta emerges from bankruptcy. But unsecured creditors typically recover only a fraction of what they are owed.
Atlanta-based Delta also said in a bankruptcy court filing yesterday that it had agreed to provide in its reorganization plan that the pension corporation would get $225 million in senior unsecured notes, which are supposed to be repaid in full after a company emerges from bankruptcy. Delta retains the right to replace the notes with cash.
Delta has already received court approval to terminate the pension plan, but it also needs the agency's nod.
The airline has said it needs to eliminate its pilots pension to successfully emerge from Chapter 11, which it hopes to do by the middle of next year.
Termination of the pension plan would mean the agency would take over the pilot pension and pay the pilots' benefits up to a maximum limit, in many cases less than what they were expecting under the company plan.
The agreement disclosed yesterday calls for the agency to complete its deliberations on the termination of the pilots' pension plan quickly. Its staff has recommended that the termination be retroactive to Sept. 2.
A hearing on the agreement between Delta and the pension corporation is scheduled for Dec. 20 in US Bankruptcy Court.
Other terms of the agreement:
When Delta emerges from Chapter 11, the agency will be deemed to have waived its rights to restore the pilot plan in full or in part.
Delta agrees not to establish any new tax-qualified defined-benefit plans for its pilots for a period of five years after the exit date.
Delta will reimburse the corporation for legal fees and expenses up to $7.5 million.
Delta's roughly 6,000 active pilots negotiated a $2.1 billion unsecured claim in the bankruptcy case, money that could help them recoup some of their lost pension benefits. Retired pilots negotiated $800 million in unsecured claims.
Delta has said it plans to maintain its non-pilot pension plan, which covers ground employees and flight attendants. It reiterated that yesterday , noting that pension reform legislation passed by Congress helped it preserve the non-pilot pension plan.
Delta, meanwhile, faces a hostile bid by US Airways Group Inc. to buy the company in a deal that would create the nation's largest carrier.
